Tag: carbon tax

Andrei Tarkovsky – in the classic SF movie Solaris – floats the thought that sincewe cannot know when we’re going to die, we are, at any given moment, immortal.

The latest report from the Intergovernmental Panel on Climate Change surreally redraws the climate change message into a risk-management challenge, and one through which risks become opportunities. Two co-chairs of IPCC working groups write that:

Progress in reducing emissions is an important part of responding to climate change, but it is not the whole solution… Investments in managing those risks can be effective and affordable. Indeed, some of the most appealing responses are relatively inexpensive. Others, which require more resources, can be developed as investments that not only provide protection from climate change, but also advance competitiveness, development, and security.

Denial is a classic human fallibility, and it comes in many forms. As Nick Cohen notes many politicians cannot discuss how their countries could accept huge reductions in their living standards in order to tackle climate change – and oddly the British Chancellor does not want Britain to ‘punch above its weight’ on this occasion – because to concede its inevitability would demand a reckoning with a world they are loath to acknowledge exists.

Climate change deniers … If they admitted they were wrong on climate change, they might have to admit that they were wrong on everything else and their whole political identity would unravel.

The professional economist (blogger) (vox) fraternity also stalks around the main issue. They point to the market failures implicit in the business-as-usual fossil-fuel subsidies – $520 billion in 2011 alone. Cap and trade is discounted (so much then for REDD?) ; carbon taxes are OK to discourage further greenhouse gas emissions. But only after fossil fuel subsidies have been phased out and preferably when investments in green and basic energy technology have been made and new technologies realized, in effect when non fossil energy prices are less than fossil fuel prices.

But time is not on our side. Emissions are accelerating, and at the current rate the twenty-first century’s entire carbon budget will be used up by 2030. China has recently the world’s largest emitter of greenhouse gases – not least because it makes much of the stuff we buy. But the issue is not about Country A or B; rather, it is more about global Company A, B, and C etc., and the response of governments (here and here). Bill McKibben in Rolling Stone nails two crucial points.

Given this hard math, we need to view the fossil-fuel industry in a new light. It has become a rogue industry, reckless like no other force on Earth. It is Public Enemy Number One to the survival of our planetary civilization…According to the Carbon Tracker report, if Exxon burns its current reserves, it would use up more than seven percent of the available atmospheric space between us and the risk of two degrees. BP is just behind, followed by the Russian firm Gazprom, then Chevron, ConocoPhillips and Shell, each of which would fill between three and four percent. Taken together, just these six firms, of the 200 listed in the Carbon Tracker report, would use up more than a quarter of the remaining two-degree budget. Severstal, the Russian mining giant, leads the list of coal companies, followed by firms like BHP Billiton and Peabody. The numbers are simply staggering – this industry, and this industry alone, holds the power to change the physics and chemistry of our planet, and they’re planning to use it. So pure self-interest probably won’t spark a transformative challenge to fossil fuel. But moral outrage just might – and that’s the real meaning of this new math. It could, plausibly, give rise to a real movement.

If the global corporates are responsible for supplying the goods and services that we consume, then we are responsible for our own over-consumption that drives the global economy to the planet’s ecological limits. Although UK per capita carbon dioxide emissions have fallen from 10 to 8.5 tons since 1990, David McKay reckons this needs to come down to 1 ton per person by 2050 based on reaching global equal per-capita emissions.

To fix the basic problem emissions need to be cut at their source. It’s time to campaign for a 10-year time frame to reduce UK per capita emissions through the setting up of individual carbon budgets. Each year everyone gets an equal allowance and each year this is reduced (for an earlier post on carbon rationing). Every purchase has a carbon cost (similar to value-added tax). If you don’t use up your allowance for the year you can sell it back into the market; if you need more you will have to buy it in that market place. Extended and free public transport and comprehensive home insulation subsidies will offset a large part of the initial transition costs; energy-efficiency will be led by innovative market economies, and the result will be sustainable employment and growth. And the transfer of income from the rich to the poor will lead to a massive reduction in inequalities.

The experience of prolonged mass unemployment, poor social services and war provided a moral imperative for the Labour Party’s campaign and victory in 1945 on a programme of establishing the welfare state. A similar campaign – to make the country fit for the twenty-first century – based on redressing social justice through reducing emissions could be a key platform for the General Election of 2015.

As Victor Havel wrote that it is essential to live within truth, and to be free. His humble greengrocer:

…has shattered the world of appearances, the fundamental pillar of the system…He has demonstrated that living a lie is living a lie. He has broken through the exalted façade…and exposed the real, base foundations of power…He has shown everyone that it is possible to live within the truth. Living within the lie can constitute the system only if it is universal…everyone who steps out of line denies it in principle and threatens it in its entirety …

*Julian Barnes – an author that I grown up with (from reading Metroland as an undergraduate, Flaubert’s Parrot as a postgraduate moonlighting in Paris, through A History of the World in 10½ Chapters and Nothing to Be Frightened Of) – in his recent book Levels of Life, writes of ” … advances which allowed us to look at ourselves better, with increasing truth.”

UPDATE: The UK’s Infrastructure Bill received royal assent on 15 February 2015; the Act makes “provision about maximising economic recovery of petroleum in the United Kingdom”. This is the essential truth about the present Conservative Party leadership’s view on climate change.

William Morris has been described by E.P. Thompson as one of the greatest of Englishmen, and as a revolutionary without a revolution [Persons & Polemics, E.P.Thompson, Merlin Press, 1994]. At the end of the nineteenth century this perspicacious man, who saw that economic relationships reflect and fashion moral relationships, rallied tirelessly against the ethic of Cain – the acquisitive society and deepening wealth inequality – in contrast to a society based on the ethic of community and a society of equals, and believing that that there could be no compromise between the two ethics set out to work for the revolution.

The appalling waste of life & suffering in the past 100 years would undoubtedly cause Morris pause for thought and probably less zeal for revolution. But his moral critique – following a long tradition of English dissenters – finds an albeit faint echo in Joseph Schumpeter’s concept of “creative destruction” which describes the uneven evolution of capitalism and corporatism, and their relationship to democracy, and which arguably has renewed relevance after twenty years of globalisation.

The question of how liberal democracies, entrepreneurs and dominant classes will respond to climate warming is now focused on the opening debate over carbon taxes, and is taking place against a background of stumbling growth and the unbridled greed of the financial markets added and abetted – in the UK – by the present and preceding New Labour administrations.

But the same Labour governments have also set two precedents: commissioning the Stern Report, and introducing the climate change bill. The first established that adopting measures to reduction carbon and other greenhouse gas emissions would cost less than failing to prevent climate change, and that such measures are affordable; the second includes a politically far-reaching timetable for mandatory cuts in targeted greenhouse gas emissions, based upon binding domestic carbon reduction targets, effectively establishing a pathway to make the UK a low-carbon based economy.

The Stern Report has been controversial, initially for the choice of discount rate, and more recently because of the assumptions and numbers used to estimate the consumption reduction equivalence (including putting a monetary value on human life), which have been used to estimate the social cost of carbon in the cost-benefit analysis for the proposed third runway at Heathrow. George Monbiot has taken umbrage that the “shadow price of carbon”, which is currently valued, human lives and all, at £25 a tonne. Human life is not a commodity, but it does have an economic value in many markets. The Economist response errs in overstating the capacity of future growth and material progress to reduce poverty in a world known to be bound by climate change constraints and the immediate necessity to reduce consumption.

Heathrow is now a lightening rod for climate change campaigners and regardless of government estimates that a new runway has a net economic benefit, it is unlikely to be built: innovative protesters plus MPs in London and Home County constituencies will ensure that profits take second place to environmental and political costs. Large infrastructure and technology projects have track record of cost underestimation and cost overruns. Hypothetical gains from growth in air traffic are not shared equally and nor are the costs: the extent to which scenarios have been developed that take into account the effect of a fuel levy on airlines, carbon taxes on airline tickets, and the cost of disturbance to Londoners remains unclear. The debate is really about re-appraising the UK’s aviation forecasts and policy in light of the need to cut emissions by 30% by 2020.

In the UK emissions are about 10 tonnes of CO2 equivalent per capita. With a population of about 60 million the current annual level of domestic emissions is 600 million tonnes. An initial low carbon tax of, say, £10 per tonne (US$15 per tonne) would generate £6,000m per year in tax revenues. Total UK tax revenues were £520,000m (about £8,500 per head) in 2006-07, of which income tax and national insurance payments represented 45%. The carbon tax can be introduced as a revenue-neutral measure, for example matched by reductions in incomes taxes – although strong arguments can be made for some carbon tax receipts to be ring-fenced to finance public support for carbon technologies, grants and subsidies to encourage the switch to lower carbon technologies for power, heat and transport, as well as part of UK contributions to international safety nets and adaptation funds for those poorer countries most likely to be directly affected first by climate change – for example to counter declining crop yields in Africa.

Faced with the social costs of their spending, consumers can be expected to reduce their demand for carbon emission goods and services, and companies will invest in more efficient technologies (Shell have called for a carbon price close to $100 – about £50 – per tonne of CO2 to justify investment in carbon-capture-and-storage schemes). Carbon pricing and supporting regulations need to be introduced quickly: the Stern report emphasised that price of delay will be higher mitigation costs.

Short of rationing only carbon pricing will induce the shifts needed for the UK to meet its commitment to reduce emissions by 60% before 2050 to about 4 tonnes per capita. Carbon pricing policies will raise many distributional issues, and open the debate on the nature of our society. William Morris would be working now to prepare the ground for a more cooperative social contract, and raging against the moral immiseration of the ruling classes, who “rather than lose anything which really is its essence, it will pull the roof of the world down upon its head.”

Following up from yesterday’s “Jefferson climate change strategy” post it is interesting to see Slate magazine’s useful summary of the results of the electronic markets for voting intentions. Both political predictors the Iowa Electronic Markets & Intrade.com data are based on actual bets.

For example here are recent values for the runners in the democratic race, with the graph below showing the suddenness in Mr.Obama’s upturn in fortune:

Obama supports a cap-and-trade approach based on the auction of permits (essentially a carbon tax, without calling it such). The increasingly likely prospect of a new president favouring concerted action on climate change is a challenge to voters and punters (betting folk and columnists) alike. The Economist’s Free Exchange makes the point that voters in areas with higher per capita emission rates might be expected to vote differently to those in lower per capita emission constituencies. Perhaps someone could adjust the data in the prediction markets? Free Exchange consistently comes off the fence on this issue:

… the best choice would appear to be the pursuit of a market-oriented carbon pricing scheme, with financial assistance to the biggest losers made contingent upon actual, realised losses.

UPDATE (Tuesday 8 Jan) from the FT: is this really what the election is about or is it rather more concerned with domestic issues and voter’s financial concerns?

I realise that I am in danger of falling into the classic European trap of treating an American presidential election as an entertaining freak show, starring Bible-bashers and philanderers, in which the outside world barely exists … it looks more likely that the November election will be a contest between Mr Obama for the Democrats and John McCain, the likely Republican winner in New Hampshire…A McCain-Obama election would confound sniffy, foreign stereotypes of the US electoral process. It would be a contest between two manifestly able men, fought very largely about foreign policy and offering voters a clear and well-argued choice.